The high rents charged by New York City landlords mean that not everyone who needs a place to stay can qualify for an apartment independently. But just because you don’t make 40x the rent as most landlords require doesn’t mean you are entirely out of luck. Many apartments will still accept your application if you can find a guarantor who agrees to also be on the lease. Here is a look at the concept of a guarantor in New York City.
When Do You Need a Guarantor in NYC?
A guarantor is someone willing to sign a lease or other credit application on your behalf and assume financial responsibility if you cannot make the necessary payments. Guarantors are most commonly needed when signing a lease, but they can be used in any scenario when a borrower is taking on debt, such as a mortgage application or other loan.
In NYC, you need a guarantor when you do not meet the landlord’s financial or credit requirements. Landlord’s typically require tenants to make at least 40x the rent and have a credit score above 680. If you do not meet these requirements, you can find a guarantor with a stronger financial profile to agree to pay the rent if you cannot. A guarantor will reduce the potential risk to the landlord and assure that you get the apartment you want.
Is a Guarantor the Same as a Cosigner?
A guarantor is similar to a cosigner, and the terms are often used interchangeably; however, they are slightly different. A cosigner is any other person who signs a lease and typically agrees to take on some of the financial burdens.
Cosigners also have a right to occupy the unit and are immediately financially responsible for the apartment. In comparison, a guarantor is only responsible for paying rent if the applicant cannot. They typically do not occupy the unit but agree to take on the financial responsibility if a tenant defaults.
So, a cosigner has more rights but also more responsibilities. In contrast, a guarantor has no right to occupy the unit but won’t have to pay a cent as long as the tenant upholds their financial commitment.
Who Can Be a Guarantor?
A guarantor can be anyone who meets the landlord’s credit can income requirements. In most cases, it’s a family member; for instance, recent graduates moving to New York City for the first that haven’t built up much credit or employment history often use their parents as guarantors to get an apartment.
However, a guarantor does not have to be a family member. It could also be a close friend, guardian, or mentor willing to vouch for you. There are also services available that will be a guarantor for you in exchange for a fee. Most landlords don’t care who the guarantor is as long as they meet the requirements and are willing to accept responsibility if you cannot pay.
What are the Requirements for a Guarantor NYC?
Landlords in New York typically require guarantors to make at least 80x the rent and have good credit. So, if the apartment is $2,000 per month, the guarantor must complete at least $160,000 per year. This could be combined income if you use more than one guarantor. But they must meet the minimum credit threshold, which is usually 680 and above (700 for stricter landlords). Also, some landlords require guarantors to be based in the US, which can be tricky for international students coming to New York for school.
Guarantors will also be required to submit financial documents like a tenant, which the landlord will review. Some landlords are stricter than others, but they will likely be approved if your guarantor meets the minimum credit and income requirements.
What Documents Does a Guarantor Need to Provide?
Guarantors are required to submit the same documents as a tenant, including:
- Photo ID
- recent tax returns
- pay stubs
- bank statements,
- employment letters
- Additional financial records related to ownership of any assets or businesses
Each landlord will have its own requirements for how much documentation is required. Some may need just a recent tax return or bank statement, whereas others will require several years’ worth. Guarantors will also be required to submit a credit report or consent to having a landlord run their credit. So essentially, the process is the same as applying as a regular tenant, but they must show twice the income.
NYC Guarantor Services
If you don’t have anyone willing or able to be your guarantor, there are services available that will act as a guarantor in exchange for a fee. Also known as renter’s insurance, these guarantor services have their own underwriting process that is typically less strict than the average NYC landlord requires. Popular examples include Insurent, the Guarantors, and Rhino which operate in several states, including New York. Here is a look at the differences between these three services.
Insurent is one of the most widely used guarantor services in New York City. To qualify, applicants must make at least 27.5 times the rent and have a minimum credit score of 630. They also charge a flat fee, usually around 70% of a month’s rent.
The Guarantors is another popular NYC-based guarantor service. They have similar requirements to Insurent (applicants must make 27x the rent and have a minimum FICO score of 630). But their cost structure is a bit different. They charge 4.5%-7% of the annual rent for US residents and 7-10% of the yearly rent for non-US residents.
Rhino is an insurance agency that offers policies for tenants, including guarantor insurance. The company only works with certain landlords, so applicants must be sure that the building they are applying for accepts Rhino. But if so, they will work with tenants with low credit and income. Their fees vary depending on the renter and maybe a flat fee or recurring monthly payment.
These services guarantee that the landlord will still receive payment, even if you miss a month. So if you get behind, they will pay the rent on your behalf, and you will instead owe the service any back rent. While they can be a great option to help you qualify for an apartment, using a guarantor service is not an excuse to fall behind on your financial responsibilities. So make sure you can afford the unit before you apply.